How to boost the interest on your savings account

	Rate (AER)	Notice	Min
	6.52%	No Notice	1
	6.51%	No Notice	1
	6.50%	No Notice	1
	6.30%	No Notice	1
	6.16%	No Notice	1
* Based on £1 Instant Access and is a limited guide to the market

Getting 10% interest on your savings may sound like a great deal but savings accounts offering such attractive rates come with terms and conditions aplenty. Barclays is the latest provider to offer a headline grabbing rate with its Regular Savings account paying 10% AER fixed for a year. But the first snag is you have to pay between £25 and £250 into the account each month and leave it there for a year. The second - and biggest - condition is you have to have to pay at least £1,000 into a Barclays' current account each month.

Critics say Barclays' current account proposition is weak and the offer is just a ploy to get more current account customers without improving the product. Existing customers may benefit from the deal but new customers should weigh up whether switching their current account to Barclays is worthwhile. Its current account pays just 0.1% credit interest compared to 4 or 5% available elsewhere.

Alliance & Leicester offered a similar deal last year where customers could open a Regular Savings account paying 10% if they set up a current account at the same time. The offer ran for a month. Customers had to choose an amount between £10 and £250 to pay into the account each month. The account paid 10% AER for year and the payment amount could not be changed. But A&L's current account is widely regarded as being superior to Barclays, meaning this was a deal worth opting for.

Savings account providers have long used headline grabbing introductory rates as a way of getting to the top of the best buy tables but chart compilers are wising up and starting to weed out accounts that come with too many terms and conditions.

Emma Butler of Moneyfacts says, "Increasingly products are being launched with headline grabbing rates to enable them to enter best buy listings. However, consumers need to be aware that the rates will drop on these accounts, often making them less competitive than accounts that initially pay lower rates.

"If people are willing to switch account providers or are aware of potential pitfalls, accounts with bonuses can be beneficial. However, it is often the case that the conditions attached to these accounts are not made clear."

"Regular savings accounts" are popular but generally have a lot of conditions and are not suitable for lump sum investments. They often have a limit to how much you can pay in each month and cut the interest rate payable if you fail to pay in the agreed amount.

Other savings accounts come with various conditions and may not give you instant access to your money. Chelsea Building Society recently launched the Chelsea Postsaver 90. It pays 5.10% interest until June 21 2006, then interest pegged at 0.25% above the Bank of England base rate until July 4 2007. You cannot withdraw anything from the account until June 22 and after that you have to give 90 days notice in writing.

Chelsea investment marketing manager Kerri Morgan says, "This account offers not only an attractive initial fixed rate of interest, but also a great rate guarantee until July 2007 with the convenience of operating the account by post. If you're happy not having instant access to your money this account is an ideal home for your savings".

Unless your account comes with a guaranteed or fixed rate for a set period of time you may find the interest rate is quietly reduced by the institution. In January alone, four main providers including Nationwide and Halifax cut rates on their savings accounts, reducing them from anything from 0.15 to 0.25%.

If you want an account without too many provisos and that lets you get to your cash instantly, topping the best buy tables right now (03/02/06) are A&L's Online Saver which pays 5.15%, followed by First Direct's e-Savings account paying 5% and Cahoot's savings account which pays 4.85%.

If you want a good rate on your current account as well as your savings, try Coventrys new combined current and savings account launched this week. The Coventry First account will pay 5.10% AER on all balances up to £250,000 and can be operated via branch, post, internet or telephone. The interest rate is variable and is guaranteed to be 0.60% AER above the Bank of England base rate for the first year from opening. It comes with an interest-free overdraft of £250 and the only proviso is you need to pay in at least £1,000 a month.

The important thing is to shop around to find a home for your savings. Research by Sainsbury's Bank shows that one in 10 banks and building societies pays less than 0.5% AER on balances and a third pay less than 1%. Sainsbury's Bank director of savings Peter Wood says, "Savers need to keep a close eye on their rates and be prepared to switch accounts if they feel that they are not receiving consistently attractive returns."

15 July 2008 © Moneyextra.com

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